September 27, 2008

UPDATE: 12/31/2009: The paper by Laderman and Reid of the San Francisco Federal Reserve Bank provides the crucial information on foreclosure rates in California, the heart of the mortgage meltdown:

We also find that race has an independent effect on foreclosure even after controlling for borrower income and credit score. In particular, African American borrowers were 3.3 times as likely as white borrowers to be in foreclosure, whereas Latino and Asian borrowers were 2.5 and 1.6 times respectively more likely to be in foreclosure as white borrowers.

So, in the economists’ simple multiple regression model, after adjusting for income and FICO, minorities in California still had substantially higher foreclosure rates than whites:

- blacks 3.3X- Latinos 2.5X- Asians 1.6X

(These adjusted gaps are all statistically significant at the 0.01 level.)

Presumably, the raw differences in foreclosure rates are greater. Unfortunately, the actual raw numbers aren't listed in the report, and the authors refused my repeated email requests to release the unadjusted numbers by ethnicity.

The raw ratios are important for estimating the overall share of defaulted dollars by ethnicity in California. We know from the federal HMDA data that minorities accounted for 77% of subprime home purchase dollars borrowed in California in 2006 (the worst vintage for defaults) and 56% of all home purchase dollars. You can see the graphs here. (I'm excluding borrowers of unknown ethnicity and mixed ethnicity couples).

In other words, minorities accounted for the great majority of defaulted dollars in California. And, California accounted for a sizable majority of all the defaulted dollars that launched the mortgage meltdown that launched the Great Recession.

For the story of my request under the Freedom of Information Act to obtain a copy of the unadjusted ratios, see here.

Since writing that fairly comprehensive article on Saturday, I've also found some seemingly trustworthy statistics on recent subprime loans by ethnicity. (Unfortunately, nobody seems to have calculated defaults by ethnicity. Perhaps nobody wants to know?)

We do know that defaults are closely tied to subprime loans. The most toxic of all, adjustable rate mortgage (ARM) subprime loans, accounted in early 2008 for only six percent of all loans outstanding but 39 percent of foreclosures started. Fixed and adjustable subprimes account for only 12 percent of loans outstanding, but half of current foreclosures. The subprime share of new lending roughly doubled from 2003 to 2004 and increased again in 2005. A remarkable fraction of defaults appear to have come from mortgages originated in 2004 through early 2007, when median prices in California, Nevada, Arizona, and Florida were absurdly high relative to median incomes.

Minorities probably have higher default rates than whites. For example, default rates on college loans are about five times higher for blacks, and more than two times higher for Hispanics, than they are for whites. (Asians are best of all at paying back college loans.) Normally, college loans are handed out more willy-nilly than mortgages, so the ethnic default rate gaps likely aren't as big in mortgages, but willy-nilly pretty much describes 2004-2006 mortgage lending in some markets.

On the other hand, they probably tend to have lower value mortgages. On the other other hand, many Hispanics are found in expensive states, especially California, epicenter of the crisis. The largest defaults in America as measured in dollar losses (number of defaults times size) appear to have come out of California's exurban fringe: the Inland Empire, Antelope Valley, and the Central Valley. All these areas tend to have mixed white and Hispanic populations.

Now, that earlier debunking.

A friend emails:

Quite a lot of mainstream conservatives---seemingly following Steve's lead---are starting to argue that racially oriented government housing policies played a very large role in the ongoing collapse of America's financial system, e.g.The Diversity Recession:http://www.vdare.com/sailer/080921_cornerstone.htmand many, many, many other articles.

I just can't see how this makes any sense. Here are my back-of-the-envelope estimates:

(1) Blacks+Latinos together make up about 1/4 of America's adult population.

(2) A very disproportionate fraction of blacks+Latinos just aren't in the mortgage/homeowner demographic category. After all, a substantial fraction of adult blacks are either current convicts, drug addicts, or welfare recipients, and a substantial fraction of adult Latinos are either recently arrived or otherwise improverished illegal immigrants.

While some members of these sub-demographic categories do own homes and have mortgages, the rates are surely extremely low compared with the general population. For example, I really don't think too many of those Latino immigrant day-laborers at Home Depot own their own homes.

(3) Furthermore, even if we exclude those black+Latino subgroups, the remaining black and Latino population is considerably poorer than thewhite+Asian population. Poorer people are much more likely to rent (orlive casually with friends and relatives) rather than own a home and have a mortgage.

(4) Therefore, I'd guess that that although black+Latinos are about 1/4 of the adult population, they'd probably have only about 10-15% of the home mortgages. Presumably, there must be some official statistics on this somewhere.

(5) Next, consider that blacks and Latinos tend to live in heavily black and Latino areas, where the housing prices are probably far below the national average. And since even homeowning blacks and Latinos are almost certainly poorer than homeowning whites+Asians, they're homes are cheaper. And probably very, very few blacks or Latinos can afford the upper-end $1M+ homes.

(6) Therefore, my rough guess is that while blacks+Latinos might hold 10-15% of the home mortgages, the total dollar amount of the mortgages held by those groups is much lower, perhaps just 5-8%. Admittedly, many Latinos live in ultra-expensive CA, but very few blacks do, and housing in heavily Latino TX is pretty cheap. A big fraction of the black population lives in the Deep South, where home prices are very low.

(7) Now suppose that 5-8% of the dollar value of American mortgages is held by blacks+Latinos. And let's suppose that the default rate amongblacks+Latinos is 3 times the white+Asian average, which is probably onthe very high side. If so, that still means that the impact of disproportionately high black+Latino default rates on the national dollar amount default rate would be pretty negligible, not remotely the sort of thing that would be causing all those banks (and maybe our entire financial system!) to collapse.

(8) Furthermore, the slice of the black+Latino population with supposedly the much higher default rates, e.g. the subprime borrowers, are also paying much higher interest rates and various extra fees and penalties, which would partially mitigate the impact of the higher default rate.

Anyway, that's my very crude analysis. I'd be very interested in knowing where my numbers might be off or what a better set of estimates might look like.

September 26, 2008

Something I've noticed over and over is that the NYC-DC based punditocracy doesn't really believe that there are 47 million Hispanics in the U.S. (Hey, you never meet any at the dinner parties we attend ...) Black people, yes, they see them on TV singing or carrying the football, they're always seeing PBS specials on the civil rights movment, so, yes, they very much believe in the existence of blacks.

But Hispanics are virtually invisible to important news media people in America. They see them when they visit Santa Fe, but otherwise, they don't occupy any space in their mental universe.

So, in the media mind, mortgage defaults by minorities can't possibly play an important role because, well, a minority is less than a majority, so therefore it can't be of any significance.

All the evidence I've seen, however, suggests that defaults by Non-Asian Minorities (NAMs) played a big role in precipitating the current crisis. But, I haven't yet seen anybody calculate a single number estimate of the size of that role. What we are really looking for is the share of all mortgage defaults, both by number and by dollar value, by NAMs. Foreclosures would be a reasonable proxy for defaults, although subprime share might not be.

To be even more accurate, we should look for the incremental defaults, above the usual expected baseline default rate. (Normally, lenders expect a small single digit percentage of defaults per year due to sad events and they plan for that rate. What's causing this wipeout is the higher than expected rate.)

Below is a trove of information posted by a commenter named david. Perhaps a reader could go through the links and figure out what that share is.

david commented

eh said:

Some statistics on non-white delinquency and defaults across all mortgage grades and loan types would be interesting to see.

Don't know if this will help you, but below I copied and cleaned up a recent (9/22) comment by an Anonymous.

Below each hyperlink is a juicy excerpt or preview therefrom.

Enjoy.

***

Someone said, "My criticism of your VDare piece is it implies that minorities are more likely to default on their loans. This is probably true. Please show the statistics to back it up. My second criticism is that the dollar value of losses may not be disproportionally [sic] minority caused."

See cites below. They show:

a) Default rate is higher among minorities; and

b) Minorities are more likely to have subprime loans even at higher income levels. (Reason: income is not a perfect proxy for IQ, and high-income minorities are very disproportionately affirmative action recipients. See the regression to the mean in Prince George's County.)

"What insurers aren't allowed to do is discriminate based on race, no matter how actuarially sound their arguments. Blacks, for example, have shorter life expectancies on average than whites, but companies aren't allowed to charge black customers more for life insurance."

"A similar pattern can be seen in Chicago, where foreclosure filings tripled, to 7,576, from 1993 to 2005. Neighborhoods where the population is more than 80 percent non-white account for 65 percent of all cases, up from 61 percent in 1993, according to data compiled by the National Training and Information Center, a housing advocacy and research group based in Chicago. The same trends have been documented in Atlanta and Philadelphia, according to researchers from Harvard and the Reinvestment Fund, a Philadelphia-based investment organization hired by the Pennsylvania Department of Banking to study mortgage foreclosures in the state."

"The 10 neighborhoods with the highest rates of mortgages from subprime lenders had black and Hispanic majorities, and the 10 areas with the lowest rates were mainly non-Hispanic white.

"...the rate of subprime lending is far higher for minorities than for whites even at higher income levels. For example, 24 percent of non-Hispanic white borrowers earning $125,000 to $150,000 took out a subprime mortgage in 2006, compared with 52 percent of Hispanics and 63 percent of non-Hispanic blacks in the same income range."

"July 13, 2007--The National Association for the Advancement of Colored People stepped into the fight against subprime lending Wednesday when it sued 12 national mortgage-lending companies for discriminatory practices."

"But Hispanics and African-Americans were far more likely to leverage the American dream with subprime loans — higher-cost products for buyers with impaired credit — that are now going bad at an alarming rate.

"About 46% of Hispanics and 55% of blacks who took out purchase mortgages in 2005 got higher-cost loans, compared with about 17% of whites and Asians, according to Federal Reserve data. The South Side of Chicago, with a large concentration of minority borrowers, has a high concentration of subprime loans and the state's highest foreclosure rate. In Boston, where defaults are rising — especially in minority areas — 73% of high-income black buyers (those making $92,000 to $152,000) and 70% of high-income Hispanics had subprime loans in 2005, compared with 17% of whites.

"...Recent immigrants lack credit histories, and 35% of Latino families don't have checking accounts. Hispanic families are more apt to have undocumented income, leading them to lenders who make loans without income verification, according to the National Council of La Raza.[...]

"Another reason for the subprime surge: Lenders have been supported by politicians and community leaders eager to promote minority homeownership, which remains about 25 percentage points below that of white non-Hispanics.

"'Access became such a buzzword that people forgot about basic lending practices,' says Keith Corbett, executive vice president of the Center for Responsible Lending. 'You are really in debt servitude, having a loan with a loan-to-value ratio of 100% or greater.'"

"High-cost subprime mortgages have often been framed as loans that catered to people with blemished credit records or little experience with debt.

"There has been less attention paid to the concentration of these loans in neighborhoods that are largely black, Hispanic, or both. This pattern, documented in federal loan records, holds true even when comparing white middle-income or upper-income neighborhoods with similar minority ones."

"The Joint Center for Political and Economic Studies reports that the rate of subprime mortgages for Latinos and African Americans is about double the rate for whites. In 2006, subprimes made up one in four mortgages (26 percent) made to whites, 47 percent of those to Latinos and 53 percent of mortgages that went to African Americans."

"Illegal immigrants were able to buy U.S. homes during the boom years, either by showing evidence that they pay taxes or by simply presenting false documents. Many of them took out high interest fixed-rate loans or subprime mortgages with a low entry rate that later rose sharply."

"It boggles the mind to think how many illegal aliens are homeowners in this country thanks to these programs, all fully insured by our government. Because of fear of lawsuits for discrimination I can also tell you that a lender may have a borrower who speaks little or no English who claims to be either a citizen or resident alien and it will not be questioned nor any proof required."

"Austan Goolsbee: Also, the historical evidence suggests that cracking down on new mortgages may hit exactly the wrong people. As Professor Rosen explains, 'The main thing that innovations in the mortgage market have done over the past 30 years is to let in the excluded: the young, the discriminated against, the people without a lot of money in the bank to use for a down payment.' It has allowed them access to mortgages whereas lenders would have once just turned them away.

"The Center for Responsible Lending estimated that in 2005, a majority of home loans to African-Americans and 40 percent of home loans to Hispanics were subprime loans. The existence and spread of subprime lending helps explain the drastic growth of homeownership for these same groups. Since 1995, for example, the number of African-American households has risen by about 20 percent, but the number of African-American homeowners has risen almost twice that rate, by about 35 percent. For Hispanics, the number of households is up about 45 percent and the number of homeowning households is up by almost 70 percent."

"Presidential nominee Barack Obama joins the list of several other high-profile Democratic Party members who received highly favorable home loans.

"Obama, D-Ill., reportedly purchased a $1.65 million mansion in Chicago through a 'super, super jumbo' loan he received from Northern Trust Bank in Illinois, the Washington Post reports.

"The portion of the money financed through the lender ($1.32 million) was offered to the Obamas at an unusually low discount interest rate locked in at 5.625 percent over the life of the 30-year fixed-rate loan, which was below the average of what a typical Chicagoan pursuing a similar low loan rate received at the time.

"For his part, Obama and his camp are defending the lower rate as lender competition for business. A spokesman for the camp says, 'The Obamas have since had as much as $3 million invested through Northern Trust.'

"Obama joins Sen. Chris Dodd, D-Conn., and Sen. Kent Conrad, D-N.D., on the list of high-profile public figures who received 'VIP' loans that some now are scrutinizing as alleged trade-offs for political favors.

"According to a report released last month by Condé Nast, Dodd received highly favorable loans under the designation, 'Friend of Angelo,' a reference to embattled Countrywide Financial Corp. head Angelo Mozilo.

"Dodd, who chairs the Senate Banking Committee, received loans from Countrywide that reportedly saved him tens of thousands of dollars.

"Conrad also has been named as a recipient of special-consideration loans from the beleaguered lender.

"Countrywide is the same bank involved in the loan scandal that caused Obama's vice presidential Vetting Team Chief James Johnson to resign amid criticism over his personal loan deals with the lender.

"Other high-ranking political officials involved in questionable 'VIP' home loans include former Secretary of Housing and Urban Development Alphonso Jackson, former Secretary of Health and Human Services Donna Shalala, and former U.N. ambassador and assistant Secretary of State Richard Holbrooke, Condé Nast reports."

If, by any chance, McCain gets even more erratic and drops out of the race (which seems like a low probability, but not out of the range of possibility) and the GOP needs a replacement in a hurry, they already have an experienced, reasonable, respected steady hand who is totally on top of current national security issues, and would probably do about as well with economic issues as anybody else they've got: Defense Secretary Robert Gates.

I'm just tossing that name out there to go along with the Romneys and Powells.

By commenter demand, here's a commercial from the late, not-so-great Washington Mutual bank:

Thanks to a commenter, here's the last press release from the nation's 6th largest bank on the day before it finally went under:

WaMu Recognized as Top Diverse Employer—Again Company ranks in top ten of Hispanic Business’ Diversity Elite and earns perfect score on the Human Rights Campaign’s Corporate Equality Index

SEATTLE, WA (September 24, 2008) – Washington Mutual, Inc. (NYSE:WM), one of the nation’s leading banks for consumers and small businesses, has once again been recognized as a top employer by Hispanic Business magazine and the Human Rights Campaign.

Hispanic Business magazine recently ranked WaMu sixth in its annual Diversity Elite list, which names the top 60 companies for Hispanics. The company was honored specifically for its efforts to recruit Hispanic employees, reach out to Hispanic consumers and support Hispanic communities and organizations.

The Human Rights Campaign, the largest national gay, lesbian, bisexual and transgender (GLBT) civil rights organization, also awarded WaMu its second consecutive 100 percent score in the organization’s 2009 Corporate Equality Index (CEI), which measures progress in attaining equal rights for GLBT employees and consumers. WaMu joins the ranks of 259 other major U.S. businesses that also received top marks in the annual survey. The CEI rated a total of 583 businesses on GLBT-related policies and practices, including non-discrimination policies and domestic partner benefits.

In both surveys, WaMu earned points for competitive diversity policies and programs, including the recently established Latino, African American and GLBT employee network groups, all of which have a corporate executive sponsor and champion.

“Diversity is an integral part of cultivating a welcoming, innovative and dynamic workplace here at WaMu. We are proud to be recognized for the opportunities and benefits we offer to all of our employees, including the specific efforts we have made to engage Hispanics and the GLBT community,” said Steve Rotella, WaMu president and COO. “We are committed to diversity at WaMu and pledge to listen to our customers and work closely with our employees to continue to make progress.”

These two recent honors build upon diversity recognitions WaMu received earlier in 2008. WaMu was named one of 25 Noteworthy Companies by Diversity Inc magazine and one of the Top 50 Corporations for Supplier Diversity by Hispanic Enterprise magazine.

About WaMu

WaMu, through its subsidiaries, is one of the nation's leading consumer and small business banks. At June 30, 2008, WaMu and its subsidiaries had assets of $309.73 billion. The company has a history dating back to 1889 and its subsidiary banks currently operate approximately 2,300 consumer and small business banking stores throughout the nation. WaMu’s press releases are available at http://newsroom.wamu.com.

Until recently, Washington Mutual was one of Wall Street’s strongest performers. It reaped big profits quarter after quarter as its then chief executive, Kerry K. Killinger, enlarged its presence by buying banks on both coasts and ramping up mortgage lending.

His goal was to transform what was once a sleepy Seattle thrift into the “Wal-Mart of Banking,” which would cater to lower- and middle-class consumers that other banks deemed too risky. It offered complex mortgages and credit cards whose terms made it easy for the least creditworthy borrowers to get financing, a strategy the bank extended in big cities, including Chicago, New York and Los Angeles. With this grand plan, Mr. Killinger built Washington Mutual into the sixth-largest bank in the United States.

Okay, Mr. Killinger, but perhaps by now you've noticed the fundamental difference between Wal-Mart and WaMu: Wal-Mart takes money from lower- and middle-class customers, while you gave money to them.

While our increasingly diverse lower- and middle-class American residents have been spending a lot in recent years in our vibrant, globalized economy, they haven't been making a lot. (You may have noticed that our elites were united in their horror of "wage inflation" and did their best to combat it through encouraging massive immigration, outsourcing, cutting tariffs, and the like.) In the long run, that's a problem. To cover the difference between what the bottom 2/3rds or whatever of society was spending and making, they've been going more in debt to, say, WaMu. You were able to mark that up as profits, which Wall Street celebrated, but eventually the clock struck twelve and the carriage turned back into a pumpkin.

To broaden the subject slightly, it's interesting that we don't yet have a name for this decade yet, even though it's almost over. All other decades for the last 80 years were named directly from the third digit (e.g., The Sixties), but nobody has agreed upon a quantitative title for this decade. Therefore, we should feel free to recommend a qualitative name. Pardon the vulgarity, but at this point I can't come up with anything more descriptive and accurate than The Bullshit Years.

September 25, 2008

John McCain, who either will or won't debate Barack Obama on Friday night, announced Thursday evening that he has accepted the resignation of campaign manager Rick Davis, after revelations that Davis was accepting payola from Freddie Mac, and that his campaign tactics this week have been masterminded by Don King and the ghost of Bobby Fischer.

A couple of years ago, the median sales price of a Los Angeles area home was $580,000. But, as Ed Rubenstein had reported on VDARE.com in 2004:

"A new study by the United Way of Los Angeles finds that 53 percent of the city’s adult population—3.8 million people—are functionally illiterate."

Do you notice a problem, a certain contradiction between very high home prices and very low human capital? If you stop and think, you might wonder how a whole bunch of people who can't read and write English are ever going to make enough money to pay off these humongous and humongously leveraged mortgages

But, nobody was supposed to stop and think because that would be racist.

As Glaivester pointed out, one of the truly insightful scenes in modern cinematic history, an exchange of dialogue that speaks profoundly about the human condition in the 21st Century, occurs in "Deuce Bigelow, European Gigolo," when Deuce Bigelow (Rob Schneider) tracks down his fugitive friend T.J. Hicks (Eddie Griffin) in Amsterdam by looking for him at the Van Gogh Chicken and Waffles Joint.

TJ: How'd you find me?

Deuce: It’s the only chicken and waffles place in Holland.

TJ: So, a black man's gotta be at a chicken and waffles place? That's racist.

Greg Cochran suggests, in the mode of Robert Heinlein's Double Star, it's because the actor who will serve as his double on the campaign trail until McCain gets over some undisclosed medical problem hasn't quite recovered from his appearance-altering plastic surgery yet. Of course, in Double Star the elderly politician never recovers, so the 40-something ham actor winds up living an extra 30 years of the statesman's life for him as Prime Minister of the Solar System.

Perhaps when the surprisingly spry UN General Secretary John McCain celebrates his 100th birthday in office, historians will begin to wonder why Kevin Spacey's film career ended so abruptly in the fall of 2008.

But here's my favorite, from david in the comments section:

"Or he's having second thoughts: who wants to be president of a bankrupt country that's soon to disintegrate?

"'I have seen the future, and I quit.'"

To be serious, though, I could imagine that McCain might have had some medical bad news and might want a few days to get second opinions and consider his options. That happened to me a dozen years ago and it doesn't leave you in the mood for public dispay. If so, I wish him all the luck in the world.

Does anybody know what the Republican Party's contingency plan is if a nominee has to drop out late in the race?

September 24, 2008

As I've been saying for a long time (see "The Diversity Recession") the easy way to get rich quick is to debauch credit standards, take the money and run, then let somebody else pay to clean up the mess. It's an inevitable temptation. That's why the government, which usually winds up on the hook for bailing out the crash to keep it from turning into a depression (e.g., with federal deposit insurance), is supposed to regulate lending, to take the punchbowl away just when the party gets interesting.

Unfortunately, the sacred word "diversity" provided an excuse for everybody who is anybody -- developers, lenders, politicians, activists -- to keep all four trotters in the trough. Its by no means the only excuse that was offered for the degradation of traditional lending standards, but whatever its absolute share of the blame, it's relative share of the blame in public discourse has been disproportionately small so far.

Here's George W. Bush's speech from six years ago to the White House Conference on Increasing Minority Homeownership. The precise programs he was advocating aren't terribly important, they're fairly minor, but the tone of his speech is important. It puts the Presidential Seal of Approval on the orgy of dubious mortgage lending (Down payments? We don't need no steenking down payments!) in the name of increasing minority homeownership.

This is the bipartisan consensus epitomized.

By the way, this isn't some eloquent oration Michael Gerson wrote and Bush just read it stolidly off the teleprompter. As you can see from the garbled syntax, this is Bush winging it, straight from his heart. He really believes all this stuff.

THE PRESIDENT: …. I appreciate your attendance to this very important conference. You see, we want everybody in America to own their own home. That's what we want. This is -- an ownership society is a compassionate society.

More and more people own their homes in America today. Two-thirds of all Americans own their homes, yet we have a problem here in America because few than half of the Hispanics and half the African Americans own the home. That's a homeownership gap. It's a -- it's a gap that we've got to work together to close for the good of our country, for the sake of a more hopeful future.

We've got to work to knock down the barriers that have created a homeownership gap.

I set an ambitious goal. It's one that I believe we can achieve. It's a clear goal, that by the end of this decade we'll increase the number of minority homeowners by at least 5.5 million families. (Applause.) … And it's going to require a strong commitment from those of you involved in the housing industry. …

I appreciate so very much the home owners who are with us today, the Arias family, newly arrived from Peru. They live in Baltimore. Thanks to the Association of Real Estate Brokers, the help of some good folks in Baltimore, they figured out how to purchase their own home. Imagine to be coming to our country without a home, with a simple dream. And now they're on stage here at this conference being one of the new home owners in the greatest land on the face of the Earth. I appreciate the Arias family coming. (Applause.)

We've got the Horton family from Little Rock, Arkansas, here today. … They were helped by HUD, they were helped by Freddie Mac. …

Finally, Kim Berry from New York is here. She's a single mom. You're not going to believe this, but her son is 18 years old. (Laughter.) She barely looked like she was 18 to me. And being a single mom is the hardest job in America. And the idea of this fine American working hard to provide for her child, at the same time working hard to realize her dream, which is owning a home on Long Island, is really a special tribute to the character of this particular person and to the character of a lot of Americans. So we're honored to have you here, Kim, and thanks for being such a good mom and a fine American. (Applause.)

I told Mel Martinez I was serious about this initiative… And the good news is, Mel Martinez believes it and means it, as well. He's doing a fine job of running HUD, and I'm glad he has joined my Cabinet. (Applause.)

I see Rosario Marin, who's the Treasurer of the United States. Rosario used to be a mayor. Thank you for coming, Madam Mayor. (Applause.) She understands how important housing is. …

All of us here in America should believe, and I think we do, that we should be, as I mentioned, a nation of owners. Owning something is freedom, as far as I'm concerned. It's part of a free society. And ownership of a home helps bring stability to neighborhoods. You own your home in a neighborhood, you have more interest in how your neighborhood feels, looks, whether it's safe or not. It brings pride to people, it's a part of an asset-based to society. It helps people build up their own individual portfolio, provides an opportunity, if need be, for a mom or a dad to leave something to their child. It's a part of -- it's of being a -- it's a part of -- an important part of America.

Homeownership is also an important part of our economic vitality. If -- when we meet this project, this goal, according to our Secretary of Housing and Urban Development, we will have added an additional $256 billion to the economy by encouraging 5.5 million new home owners in America; …

Low interest rates, low inflation are very important foundations for economic growth. The idea of encouraging new homeownership and the money that will be circulated as a result of people purchasing homes will mean people are more likely to find a job in America. This project not only is good for the soul of the country, it's good for the pocketbook of the country, as well.

To open up the doors of homeownership there are some barriers, and I want to talk about four that need to be overcome. First, down payments. A lot of folks can't make a down payment. They may be qualified. They may desire to buy a home, but they don't have the money to make a down payment. I think if you were to talk to a lot of families that are desirous to have a home, they would tell you that the down payment is the hurdle that they can't cross. And one way to address that is to have the federal government participate.

And so we've called upon Congress to set up what's called the American Dream Down Payment Fund, which will provide financial grants to local governments to help first-time home buyers who qualify to make the down payment on their home. If a down payment is a problem, there's a way we can address that. And when Congress funds the program, this should help 200,000 new families over the next five years become first-time home buyers.

Secondly, affordable housing is a problem in many neighborhoods, particularly inner-city neighborhoods. … I'm doing is proposing a single-family affordable housing credit to encourage the construction of single-family homes in neighborhoods where affordable housing is scarce. (Applause.)

Over the next five years the initiative will provide home builders and therefore home buyers with -- home builders with $2 billion in tax credits to bring affordable homes and therefore provide an additional supply for home buyers. …

And we've got to set priorities. And one of the key priorities is going to be inner-city America. …

Another obstacle to minority homeownership is the lack of information. You know, getting into your own home can be complicated. It can be a difficult process. I had that very same problem. (Laughter and applause.)

Every home buyer has responsibilities and rights that need to be understood clearly. And yet, when you look at some of the contracts, there's a lot of small print. And you can imagine somebody newly arrived from Peru looking at all that print, and saying, I'm not sure I can possibly understand that. Why do I want to buy a home? There's an educational process that needs to go on, not only to explain the contract, explain obligation, but also to explain financing options, to help people understand the complexities of a homeownership market, and also at the same time to protect people from unscrupulous lenders, people who would take advantage of a good-hearted soul who is trying to realize their dream.

Homeownership education is critical. And so today, I'm pleased to announce that through Mel's office, we're going to distribute $35 million in 2003 to more than 100 national, state and local organizations that promote homeownership through buyer education. (Applause.)

And, of course, one of the larger obstacles to minority homeownership is financing, is the ability to have their dream financed. Right now, we have a program that all of you are familiar with, maybe our fellow Americans are, and that's what they call a Section 8 housing program, that provides billions of dollars in vouchers to help low-income Americans with their rent. It encourages leasing. We think it's important that we use those vouchers, that federal money to help low-income Americans go from being somebody who leases to somebody who owns; that we use the Section 8 program to not only help with down payment, but to help with continuing monthly mortgage payments after they're into their new home. It is a -- it is a way to help us meet this dream of 5.5 million additional families owning their home.

I'm also going to encourage the lending industry to develop a mortgage market so that this script, these vouchers, can regularly be used as a source of payment to provide more capital to lenders, who can then help more families move from rental housing into houses of their own. …

Last June, I issued a challenge to everyone involved in the housing industry to help increase the number of minority families to be home owners. And what I'm talking about, I'm talking about your bankers and your brokers and developers, as well as members of faith-based community and community programs. And the response to the home owners challenge has been very strong and very gratifying. Twenty-two public and private partners have signed up to help meet our national goal. Partners in the mortgage finance industry are encouraging homeownership by purchasing more loans made by banks to African Americans, Hispanics and other minorities.

Representatives of the real estate and homebuilding industries, through their nationwide networks or affiliates, are committed to broadening homeownership. They made the commitment to help meet the national goal we set.

Freddie Mae -- Fannie Mae and Freddie Mac -- I see the heads who are here; I want to thank you all for coming -- (laughter) -- have committed to provide more money for lenders. They've committed to help meet the shortage of capital available for minority home buyers.

Fannie Mae recently announced a $50 million program to develop 600 homes for the Cherokee Nation in Oklahoma. Franklin [Raines], I appreciate that commitment. They also announced $12.7 million investment in a condominium project in Harlem. It's the beginnings of a series of initiatives to help meet the goal of 5.5 million families. Franklin told me at the meeting where we kicked this office, he said, I promise you we will help, and he has, like many others in this room have done.

Freddie Mac recently began 25 initiatives around the country to dismantle barriers and create greater opportunities for homeownership. One of the programs is designed to help deserving families who have bad credit histories to qualify for homeownership loans. …

There's all kinds of ways that we can work together to meet the goal. Corporate America has a responsibility to work to make America a compassionate place. Corporate America has responded. As an example -- only one of many examples -- the good folks at Sears and Roebuck have responded by making a five-year, $100 million commitment to making homeownership and home maintenance possible for millions of Americans. …

The non-profit groups are bringing homeownership to some of our most troubled communities. …

The other thing Kirbyjon told me, which I really appreciate, is you don't have to have a lousy home for first-time home buyers. If you put your mind to it, the first-time home buyer, the low-income home buyer can have just as nice a house as anybody else. And I know Kirbyjon. He is what I call a social entrepreneur who is using his platform as a Methodist preacher to improve the neighborhood and the community in which he lives.

And so is Luis Cortes, who represents Nueva Esperanza in Philadelphia. I went to see Luis in the inner-city Philadelphia. … But he also understood that a homeownership program is incredibly important to revitalize this neighborhood that a lot of folks had already quit on. …

Again, I want to tell you, this is an initiative -- as Mel will tell you, it's an initiative that we take very seriously. … Thank you for coming. May God bless your vision. May God bless America. (Applause.)

What would 5.5 million marginal mortgages cost? I dunno ... at, say, $127,000 each, that would be, what, $700 billion?

This might be another case where we would have been better off with a straightforward affirmative action program for Non-Asian Minorities (NAMs) rather than lower standards for everybody. At least, with quotas, you get the best from each race, whereas when you lower standards enough for NAMs to get higher representation, you wind up with lower quality from within each group.

For example, when NAMs complained to the Nixon Administration that the they weren't passing the federal civil service exam at the same rate as whites, the government spent a fortune creating the perfect new civil service exam, the PACE, with five subsections, validated for over 100 different jobs. Of course, a higher quality test didn't solve the problem of lower NAM competence, so the Carter Administration junked the PACE and left it up to each department to cobble together its own hiring process, with deleterious long-term results.

Here's an article from the Brown U. Daily Herald on the role of Brownies, namely the President and an education prof, in the Chicago Annenberg Challenge, of which Obama was chairman of the board. It's a classic example of John O'Sullivan's law that any non-profit organization that isn't explicitly conservative always ends up being run for leftists ends. Arch-Republican Walter Annenberg puts up a half billion bucks, $100,000,000 of which went to Chicago, to fix the public schools. For advice, he turns to two people at Brown, the leftiest of the Ivy Leagues. They direct his money to a proposal co-authored by unrepentant terrorist Bill Ayers, husband of Charles Manson fan Bernardine Dohrn. In turn, Barack Obama gets hired as chairman of the board of the organization dreamed up by Ayers to hand out money to leftist organizations in Chicago like ACORN. The $100 million of Annenberg's money doesn't do much for the test scores of Chicago public school students, but it does wonders for building Team Obama among his base, leftist activists and civil servants.

September 23, 2008

You're dead right to describe the bailout as a coup - in fact, it's worse than that; to all intents and purposes it's a management buyout of the American financial and political systems.

And done with Other People's Money!

I've been blogging about this since last Tuesday (to anyone who's willing to listen) - there is absolutely no normative difference between the proposed operation of Paulson's bailout and Gaetano Salvemini's description of Mussolini's economic theory as being that 'profit is private and personal, loss is public and social'.

John McCain hasn't mentioned Rev. Jeremiah Wright in months, so I imagine he won't start in Friday's debate ...

But here's something I posted last March on the eve of Obama's 5,000 word oration on the edifying ineffability of his nuanced thoughtfulness about race (which, by the way, happened right after the Bear Stearns collapse):

Keep in mind that the Wright-Obama connection has two interrelated but distinguishable aspects: the black racial angle and leftist ideological angle. My guess is that Obama will play up the black angle of his past (as being both more understandable -- seeing as how Obama, kind of like Jesus, was a poor black child raised by a single mother in the ghetto of Honolulu -- and more untouchable by the press) and totally ignore the leftist angle.

It would be more fun if Obama reversed the polarity and snarled, "Yeah, yeah, for the last 12 years, I forced myself to nod in seeming agreement when all those smug Friedmanite economists at my University of Chicago would ramble on about the magic of the market. But, in my heart, I knew this glorious day would someday come when the capitalist system crumbles in ruins! Nyah-hah-hah-hah!"

And there was some ostensibly good news. Nationwide, more students are taking algebra than before. Over five years, the percentage of eighth-graders in advanced math -- algebra or higher -- went up by more than one-third. In total, about 37% of all U.S. students took advanced math in 2005, the most recent year in the analysis.

Yet some 120,000 of these students -- about 8% -- are scoring in the lowest 10% on the eighth-grade National Assessment of Educational Progress. Many thousands more are performing well below grade level.

And when students perform poorly in a math course where they don't belong, no one benefits, said Tom Lawless, a senior fellow at Brookings.

Across the country, "you have 120,000 kids sitting in algebra and geometry classes and they don't know how to multiply and divide," Lawless said. "That's an absurd situation. They're not going to learn anything. And the kids who are sitting next to them, who are well prepared, are not going to learn anything either" because their learning will be slowed down.

On average, there are at least two students in every eighth-grade algebra class with second-grade math skills. That number rises in urban school systems where these students are more likely to attend overcrowded schools with teachers who are less experienced and less likely to have math degrees or college-level advanced math. These students also are disproportionately low-income minorities.

For many, algebra has become a civil rights issue. Students who take algebra early have a leg up on college and career. And minorities and the poor have a glaringly lower enrollment rate in early algebra. But just taking the course is not enough.

As evidence, Lawless pointed to the District of Columbia, which rates near the top in eighth-grade algebra enrollment and dead last on the math portion of the eighth-grade national assessment. Near the top in math achievement are Vermont and North Dakota, which enroll a comparatively small percentage of students in advanced math. There is no correlation nationwide between eighth-grade algebra policies and performance in algebra, Lawless said.

The two men [Treasury Secretary Paulson and Fed Chairman Bernanke] have been working early and working late, tracking Asian markets and fielding calls from their European counterparts, then reconnecting with each other by phone eight or nine times a day, talking so often that they speak in shorthand. Mr. Paulson has powered through the long days with a steady infusion of Diet Coke. Asked twice to testify by the Senate last week, he begged off.

“He told me he had like four hours of sleep,” said Senator Christopher J. Dodd, Democrat of Connecticut and chairman of the Banking Committee. But there were limits to Mr. Dodd’s sympathy. “The public wants to know what’s going on,” he said he replied.

Mr. Bernanke (his drink: Diet Dr Pepper) has made a point of leaving the office by midnight to get at least some rest, but friends say the toll on him is clear as well.

Here's the Google Wallet FAQ. From it: "You will need to have (or sign up for) Google Wallet to send or receive money. If you have ever purchased anything on Google Play, then you most likely already have a Google Wallet. If you do not yet have a Google Wallet, don’t worry, the process is simple: go to wallet.google.com and follow the steps." You probably already have a Google ID and password, which Google Wallet uses, so signing up Wallet is pretty painless.

You can put money into your Google Wallet Balance from your bank account and send it with no service fee.

Google Wallet works from both a website and a smartphone app (Android and iPhone -- the Google Wallet app is currently available only in the U.S., but the Google Wallet website can be used in 160 countries).

Or, once you sign up with Google Wallet, you can simply send money via credit card, bank transfer, or Wallet Balance as an attachment from Google's free Gmail email service. Here'show to do it.

(Non-tax deductible.)

Fourth: if you have a Wells Fargo bank account, you can transfer money to me (with no fees) via Wells Fargo SurePay. Just tell WF SurePay to send the money to my ancient AOL email address steveslrATaol.com -- replace the AT with the usual @). (Non-tax deductible.)

Fifth: if you have a Chase bank account (or, theoretically,other bank accounts), you can transfer money to me (with no fees) via Chase QuickPay (FAQ). Just tell Chase QuickPay to send the money to my ancient AOL email address (steveslrATaol.com -- replace the AT with the usual @). If Chase asks for the name on my account, it's Steven Sailer with an n at the end of Steven. (Non-tax deductible.)

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